Refer to Figure 15.1, which lists the prices of various Facebook options. Use th

Question

Refer to Figure 15.1, which lists the prices of various Facebook options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following Oct-14 expiration options on a single share, assuming that the stock price on the expiration date is $79. (Leave no cells blank - be certain to enter "O" wherever required. Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.) Payoff Profit/Loss a-Call option, X= 75 b. Put option, X = 75 c-Call option, X= 80 dPut option, X = 80

Explanation / Answer

Option Cost Payoff Profit/loss = Payoff-Cost Call X=75 3.95 Max(S-X,0) = Max(79-75,0) = 4 4-3.95=0.05 Profit Put X=75 3.01 Max(X-S,0) = Max(75-79,0) = 0 0-3.01=3.01 Loss Call X=80 1.65 Max(S-X,0) = Max(79-80,0) =0 0-1.65=1.65 Loss Put X=80 5.72 Max(X-S,0) = Max(80-79,0) = 1 1-5.72 = 4.72 Loss

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